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Credit Constraints and Growth in a Global Economy

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  • Coeurdacier, Nicolas
  • Guibaud, Stéphane
  • Jin, Keyu

Abstract

In a period of rapid integration and accelerated growth in emerging markets, three striking trends have been (1) a divergence in the private saving rates of emerging markets and advanced economies, (2) large net capital outflows from emerging markets, and (3) a sustained decline in the world interest rate. This paper shows that in a multi-period OLG model, the interaction between growth and household credit constraints --- more severe in emerging markets --- is able to account for all of the above facts. We provide micro-level evidence that corroborates our mechanism: saving behaviors across age groups in the U.S. and China are broadly supportive of the predictions of the model.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9109.

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Date of creation: Aug 2012
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Handle: RePEc:cpr:ceprdp:9109

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Keywords: capital flows; credit constraints; Globalization; life-cycle household savings; saving and current account imbalances;

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Cited by:
  1. Yi Wen, 2011. "Making sense of China’s astronomical foreign reserves," Working Papers 2011-018, Federal Reserve Bank of St. Louis.
  2. David Backus & Thomas Cooley & Espen Henriksen, 2013. "Demography and Low Frequency Capital Flows," NBER Working Papers 19465, National Bureau of Economic Research, Inc.
  3. Bussière, Matthieu & Kalantzis, Yannick & Lafarguette, Romain & Sicular, Terry, 2013. "Understanding household savings in China: the role of the housing market and borrowing constraints," MPRA Paper 44611, University Library of Munich, Germany.
  4. Pierre-Olivier Gourinchas & Hélène Rey, 2013. "External Adjustment, Global Imbalances and Valuation Effects," NBER Working Papers 19240, National Bureau of Economic Research, Inc.

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